What is a reconciliation discrepancy?
A difference between the books and the bank that the usual outstanding items do not explain. It is the leftover gap after known timing items have already been listed.
Definition
A reconciliation discrepancy is an unexplained difference left after a reconciliation is attempted. It is the leftover gap between the books and the bank after the usual timing items have already been listed.
This gap is not itself a journal. It is a signal that a movement is missing, duplicated, or coded to the wrong period, and the later correcting entry sits on another page.
Where it shows up
Balance Sheet: Related to cash that does not yet agree.
Cash flow: Related to a movement the books or the bank is missing.
P&L: Related to nothing extra until a later correction is recorded.
See also: Bank Reconciliation · Account Reconciliation · Suspense Account
When you look at the Balance Sheet, cash is the caption that should agree to the bank after known timing items are listed. A leftover difference means that cash figure is not yet proven.
The Income Statement does not carry a discrepancy line. Income or expense changes only if a later correction is posted to those accounts.
The Statement of Cash Flows is related because the missing piece is usually a deposit, a withdrawal, or a fee that one side recorded and the other did not. Finding it is how you learn which cash movement is absent.
The gap shows up on the matching worksheet as a remainder. It is not a named account on the published statements.
How it works
Someone first lists the known timing items. Checks the company wrote that the bank has not paid, and deposits the books recorded that the bank has not posted, are the usual ones.
Book cash, plus and minus those items, should equal the bank's ending figure. If it does not, the leftover amount is the discrepancy.
The next step is to hunt for the cause, not to force the numbers together. Common causes are a fee the bank took that the books missed, a deposit entered twice, a check recorded at the wrong amount, or a transfer posted to the wrong account.
Until the cause is found, some teams park the amount in a temporary holding account. That holding line is a placeholder, not a solution, and it should be cleared when the real entry is known.
A small leftover is still a leftover. Materiality tells you whether a reader would care, but it does not turn an unexplained gap into a proven cash balance.
The later correcting entry, if one is needed, is a dated debit and credit. This page stays on the unexplained remainder, not on that later journal.
Example
A florist is tying July book cash to the bank's July figure. Book cash is $8,640, and the bank shows $8,400.
She lists a $200 check mailed Friday that the bank has not paid, and a $400 night-slot deposit the bank has not posted. After those two timing items, the books still sit $40 above the bank.
The usual outstanding items do not cover the $40. That leftover is the discrepancy.
She looks at the bank's July detail and finds a $40 returned-item fee she never entered. Once that fee is recorded, book cash falls by $40 and the remainder disappears.
Until she found the fee, the $40 was not a known timing item. It was an unexplained gap, and July cash was not yet proven.
Common mix-ups
A discrepancy is not the same as a check the company wrote that the bank has not paid. That check is a known timing item, and a discrepancy is what remains after those known items are already on the worksheet.
It is also not the matching worksheet itself. The worksheet is the proof, and the discrepancy is the leftover that means the proof is not finished.
Do not plug the gap with a round "miscellaneous" expense just to make cash agree. That hides the missing movement and can put the error on the Income Statement instead of finding it.
Related terms
- Bank Reconciliation: Matching the book cash balance to the bank statement and explaining every difference.
- Account Reconciliation: Proving that a ledger balance agrees to independent support.
- Suspense Account: A temporary holding account for transactions that cannot yet be classified.
- Adjusting Journal Entry: An entry made at period end to record accruals, deferrals, and corrections.
- Reconciliation Workpaper: The documented support showing how a reconciled balance was proven.
- Audit Trail: The traceable chain from a reported number back to its source document.
- Materiality: The threshold at which an error or item is big enough to matter to a reader.
- Outstanding Check: A check written but not yet cleared by the bank.